Patent box claims increase to over £900 million

HMRC has released its annual statistical report on the uptake of the Patent Box for 2015/16, including partial results for 2016/17. The Patent Box is a tax relief scheme which enables companies to pay a reduced rate of 10% corporation tax on profits derived from patented inventions.

The figures are broken down by company size, industry sector, and geographical region.

The delay in publishing the statistics for the 2015/16 financial year is because companies are allowed to back-date their Patent Box claims up to two financial years. However, for the first time, HMRC decided to include partial statistics for 2016/17 because their previous data shows that most claims will have been filed by the end of the first quarter of the second year after the accounting period ended.

Key Points

For the 2015/16 financial year, 1,160 companies claimed a total of £754.3 million in tax relief using the Patent Box. In 2016-17, 1,025 companies claimed £942.5 million in relief.

Just over a quarter of the companies were classified as ‘large’ (28.4% in 2015/16 and 27.3% in 2016/17) but they accounted for the majority of relief claimed (95.5% in 2015/16 and 96.3% in 2016/17).

Most companies claiming tax relief were in the manufacturing sector (54.7% in 2015/16 and 54.6% in 2016/17).

Manufacturing companies also claimed the highest value of relief (48.4% of the total in 2015/16 and 37.1% in 2016/17).

There was regional variation amongst the relief claiming companies. The highest numbers were located in the South East (17.2% in 2015/16 and 17.1% in 2016/17) and the lowest numbers in the North East (2.6% in 2015/16 and 2.4% in 2016/17).

Similarly, there was also regional variation for the value of the relief claimed, with London claiming more than half of the total (50.8% in 2015/16 and 55.3% in 2016/17).

Analysis

In 2014/15, 1,135 companies participated in the Patent Box scheme; an increase of 27% compared to the previous year. In 2015/16, these numbers increased by just 2% to 1,160.

Although the number of companies participating in the Patent Box scheme appears to have steadied, the value of relief claimed has grown significantly. From 2014/15 to 2015/16, the amount of tax relief claimed increased by over £100 million and in the partial data for 2016/17, claims increased again by almost £190 million to £942.5 million.

This suggests that businesses are becoming savvier about identifying qualifying patented inventions and maximising the relief they can claim.

However, when we compare the levels of participation to the government’s R&D Tax Credit scheme, which increased participation by 22% in 2015/16 to 43,040 (of which 36,820 were SMEs), it seems likely that there are eligible businesses who are still not taking advantage of the Patent Box scheme.

If your business owns a patent, has an exclusive licence over someone else’s patent, or could file a new patent application, you should consider your eligibility for the Patent Box.

The average Patent Box SME claim value is around £55,000, offering potentially significant returns which can be reinvested into your organisation.

If you would like to file a new patent application, accelerate prosecution of an existing patent application or re-evaluate your patent application filing strategy in order to take advantage of the Patent Box, please get in touch with us today.

If you have an existing patent or patent application and would like to elect into the Patent Box, please contact your accountant or get in touch with us, and we can refer you to a recommended accountant who can advise you on the Patent Box.

We will be running a Patent Box and R&D Tax Credit workshop in early 2019 where we will explain how you can take advantage of these tax relief schemes and use your intellectual property to maximise the benefits. For further information please email tristan.outlaw@wilsongunn.com.